Andrew Snowdon, Partner and Head of Tax at UHY Hacker Young, says: “With the furlough scheme being withdrawn at the end of the month, the increase in National Insurance will have made the cost of keeping jobs that much more expensive.”

“Unfortunately, this extra burden may have helped make the decision for employers who were in two minds over keeping the jobs of those on furlough. It will be the employees who suffer as a result.”

The increase will also see the gap between employment and self-employment widen even further. Employees and employers will both have to pay an extra 1.25% in National Insurance (total increase of 2.5%), whereas dividend and self-employment tax will have a singular, 1.25% increase.

While the 1.25% tax increase is initially through an increase in National Insurance, it will be made into a separate levy from April 2023. This creates another step and even more complexity for businesses with employees on payroll.

Additionally, employees who have reached state pension age typically don’t need to pay National Insurance. However, they will be subject to the new levy, which businesses will need to take into account.

John Sheehan, Partner at UHY Hacker Young, says: “We expect the rise in National Insurance will increase differences between employment and gig economy taxation. As a result, employers may be encouraged to make more use of self-employed workers, while shifting away from employees.”

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“The Government has made the point in the past that it would work on closing the gap between taxation of the employed and self-employed, however, its latest tax increase will have done the opposite.”